What must independent auditors of public companies include in their audit procedures?

Independent auditors of public companies are required to include procedures designed to detect illegal acts in their audit procedures. This is essential because auditors play a critical role in safeguarding the integrity of financial reporting and ensuring compliance with legal and regulatory standards.

The inclusion of procedures for detecting illegal acts addresses the auditor's responsibility to assess the risk of fraud and to evaluate whether financial statements are presented fairly and in accordance with the applicable accounting frameworks. This effort not only helps protect stakeholders, including investors, creditors, and the broader market, but also promotes transparency and accountability within the organization.

In contrast, assuring that fraud will not occur is unrealistic and not a requirement for auditors, as it is impossible to guarantee the complete absence of fraud. Procedures for evaluating employee performance, while important for internal management purposes, do not fall under the audit procedures focused on financial accuracy and compliance. Similarly, while understanding the history of past fraud incidents can provide context and inform risk assessments, it does not constitute a required audit procedure for detecting current illegal acts. Therefore, the focus on procedures designed to detect illegal acts is a crucial component of the independent auditor’s responsibilities in protecting the interests of the public and maintaining trust in financial reporting.